Liquidation Level – What is Liquidation Level?

What is Liquidation Level?

Definition of Liquidation Level: This level is explained as a specified level generally expressed in the form of a percentage. This is usually created by the Forex broker while opening an account to reduce the risk of broker that he might face from the trader. When one reaches a certain level, the account of the trader automatically starts liquidating an outstanding trading position, therefore lessening his danger and the broker’s risk also. The level of liquidation is founded by the total amount of starting and upholding deposits that the trader puts into an account, offering some control on the real level quantity. The level is needed as Forex traders use the leverage frequently in order to raise the potential for the return. On the other hand, the leverage also raises danger, mainly for the agent as he advances the marginal finances. The traders should be careful after employing the leverage and mindful of their individual liquidation levels prior to making an entry to the leveraged positions.